What is Third-Party Insurance Cover and How Does It Work?

What is Third-Party Car Insurance?

The third-party car insurance is the most basic type of motor insurance policy. It offers financial coverage against liabilities arising from damage/loss to a third-party person or property caused by the insured vehicle in an accident. In simple words, the third party insurance meaning is a policy that pays for the damages you cause to another person’s property or health.

Suppose, while driving, you accidentally hit another car. In that mishap, the other party’s vehicle gets damaged, and the driver suffers an injury. In that case, the TP cover in insurance will cover the financial and legal liabilities resulting from the third party’s damages.

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Why is Third-Party Car Insurance Important?

In India, having valid car insurance with third-party liability cover at a minimum is mandatory. The Motor Vehicles Act 1988 has made third-party car insurance compulsory for all cars operating on public roads. Driving a car without a valid third-party car insurance cover is illegal and attracts hefty monetary fines and/or imprisonment.

The government has made this compulsory as a means to promote road safety and legal responsibility, and guarantee financial protection for the victims. Hence, as a responsible driver, you need to invest in motor insurance for your car with at least third-party cover to comply with the legal mandate and ensure a worry-free ownership and driving experience. Additionally, it is mandatory for all new private cars to be sold with a 3-year long-term third-party car insurance policy.

What does Third-Party Car Insurance Cover?

Let’s take a look at what does third party insurance cover, go through the following pointers:

Bodily injuries:

Bodily injuries are a common aftermath of car accidents. Regardless of how intense the injuries are, third-party car insurance offers compensation to the victim for costs incurred on medical treatment.

Disability:

In cases where the third party has suffered partial disability from injuries resulting from a car accident, the policy provides compensation to cover medical costs. If they have suffered permanent disability, then a lump sum amount is provided as compensation.

Death:

For car accidents that lead to the death of a third-party individual, claims are judged according to the court tribunals. The compensation amount is determined by the court as per specified parameters, such as the victim’s age, earning capacity and number of dependents, and is paid by the insurer under the third-party car insurance cover.

Property damage:

In the event that a car accident results in property damage, the insurer offers compensation to the affected party for the necessary repair and replacement of the damaged property. The maximum cap of this compensation is up to INR 7.5 lakhs as per the IRDAI guidelines.

What does Third-Party Car Insurance Not Cover?

These are the exclusions under third-party car insurance cover:

Own damages:

The third party insurance coverage doesn’t include damages or losses suffered by the insured vehicle. These are covered under SAOD and comprehensive car insurance plans.

Personal accident:

The base third-party premium doesn’t cover accidental injuries or the death of the owner-driver. It is included in the Compulsory Personal Accident (CPA) cover of INR 15 lakhs, which the IRDAI has made mandatory for all vehicle owners.

Cashless and NCB benefits:

Due to the absence of the own damage component, the third-party four-wheeler insurance does not provide No Claim Bonus (NCB) or cashless repair benefits.

Others:

The policy may not offer coverage in the event of driving while drunk or under the influence of illicit drugs, driving without a valid licence, damages outside of national borders, etc.

How Much Does Third-Party Car Insurance Cost in India?

Unlike the own damage component in car insurance, the premium for third-party liability cover is fixed across insurers and is decided by the IRDAI. It is decided on the basis of the car’s engine capacity (cc) or battery capacity (kW). The following chart showcases the latest premiums for third party insurance coverage for cars:

Private ICE Cars

• Engine capacity less than 1000 cc: ₹2,094 per year
• Engine capacity more than 1000 cc and less than 1500 cc: ₹3,416 per year
• Engine capacity more than 1500 cc: ₹7,897 per year

Private Electric Cars

• Battery capacity less than 30 kW: ₹1,780 per year
• Battery capacity more than 30 kW and less than 65 kW: ₹2,904 per year
• Battery capacity more than 65 kW: ₹6,712 per year

Benefits of Third-Party Car Insurance

There are numerous benefits of investing in a third party car insurance, and the following pointers highlight a few:

Affordable

The cost of third-party car insurance is nominal and is determined by the IRDAI. Depending on the engine or battery capacity of your vehicle, you can secure this plan for your car at a low cost and enjoy coverage benefits against third-party liabilities.

Financial protection

With a valid third-party insurance for four-wheelers, the insurer pays the necessary compensation for third-party losses. It makes sure that legal liabilities from such mishaps, which can add up to significant amounts, are adequately settled by the insurance company without draining your personal savings.

Legal compliance

According to the law, it is mandatory to have at least third-party liability cover to legally drive your car on Indian roads. Hence, by investing in this policy, you will be able to comply with the legal mandate and avoid fines and penalties for driving without insurance.

Further coverage scope

While third-party insurance is the legal baseline, you can enhance your protection by adding a standalone own damage cover. This combination will make sure that you are protected against both legal liabilities and your own damages for your vehicle.

Important note: As per the law, an OD cover is optional, but a TP cover in insurance is mandatory. You can’t legally operate your car with just the standalone own damage cover. You need to have an active third-party car insurance policy as a base to meet the mandatory legal standards.

Conclusion

The third-party insurance cover is a crucial component for all car owners in India. By securing this mandatory cover, you can adhere to the compulsory legal requirement and protect your savings from liabilities arising from third-party damages or losses. However, for total peace of mind, consider pairing it with your own damage cover.

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